Paper given at the Seventh National Conference on Unemployment,
University of Western Sydney, November 29-Dec.

The system of income support which exists in any country determines the impact unemployment has on low income earners. Government's throughout the English speaking western world have imposed means testing, targeted benefits, activity testing and 'mutual obligation' regimes to discourage those without paid work from becoming 'dependent' on the State. These governments are obsessed by the need to limit the amount of income support so as discourage people remaining on benefits (the old less eligibility principle).

There is an alternative approach to income support: that of Basic Income which, if implemented, could as Andre Gorz (1999 p. 85) and Goodin (1992) suggest result in a more equitable sharing of paid work, civil activity and leisure without inhibiting productivity.

This paper will examine the way the existing Australian system of income support, with its associated compulsion imposed upon income support recipients, is an inadequate 'solution' to either income needs or employment. The paper suggests that a Guaranteed Minimum Income would be an improvement but that a universal Basic Income is the most useful approach, which if implemented, is capable of meeting both income and employment needs.

A brief history of despising unemployed people

Since at least the 1950s, successive Australian governments have believed that the working class generally and people who are unemployed in particular have a propensity to sink into the slough of 'dependency' unless the State was ever vigilant. This was why the unemployment benefit eligibility requirements, since that time, have demanded applicants establish they are "fit, ready and willing to work". Hence the old Department of Social Security joke that "Christ would be refused unemployment benefits because he had a beard, wore sandals and hung round the Cross".

From the end of the Second World War until 1974 unemployment in Australia remained around 1% most of the time (Stilwell 2000, Boreham, Dow & Leet 1999, Langmore and Quiggan 1994, Watts [Martin] 2000). Since then unemployment has dramatically risen here as in most parts of the western world (Rifkin 1994, Omerod 1994, Kelsey 1995, Boreham, Dow & Leet 1999, Stilwell 2000). Associated with the rise in the level of unemployment has been, in the Australian and New Zealand (Bradford 1997) context, an increase in the vitriol which governments have directed towards those whom government and industry policy excluded from the paid labour force (Boreham, Dow & Leet 1999 Ch. 1).

In 1972 the advent of the Whitlam government initially heralded a new deal for social security recipients but as the level of unemployment, particularly youth unemployment, rose in Australia so too did the frequency of attacks on unemployed people. Starting with Hayden and Cameron's slurs about 'work shy lion tamers' and 'dole bludgers' (Windschuttle 1981) attacks on unemployed people increased in intensity during the Fraser Government (Tomlinson 1982 Chapter 3). During the Hawke and Keating Governments, Brian Howe, Minister for Social Security, gave expression to negative evaluations of unemployed people through rediscovering their propensity for 'dependency'. This in turn led Professor Bettina Cass (1986, 1988, Cass, Gibson, & Tito, 1988), who was heading a review of the Department, to propose extending the work testing of unemployed people to encompass activity testing. This suggestion, in turn, has found recent expression in the 'participation income support' agenda proposed by the Reference Group on Welfare Reform (2000). Jocelyn Newman (1999), the current Minister with responsibility for income support, is obsessed with the propensity of poor people to become 'dependent' on the State. The Howard Government's 'work for the dole' and wider 'mutual obligation' agendas are simply an extension and intensification of the obligating regimes imposed on unemployed people in Australia for the last half century.

Where income support for unemployed people fits in the Australian social security system

The Howard Government has declared its intention to maintain a social welfare safety net in order to assist all in need through no fault of their own (Howard 1999, 2000, Newman 1999 p. 7). The Australian income support system is currently non-contributory, categorical, selective, and targeted towards categories of beneficiaries on the basis of some presumed 'need'. From 1912 until 1987 child endowment was a universal payment. Now metamorphosed into family allowances, it too fits the general mould. There is still one payment 'the blind pension', a subcategory of the disability support pension, which is not selective.

Attempting to ascertain the degree of impairment experienced by an individual applicant and then paying those applicants who can establish they have met some predetermined 'level of incapacity to work' is very costly and an extraordinarily inefficient method of providing income support to those with a disability. People with equivalent levels of impairments often have widely different employment histories (Perry 1995 p.29). It would be more efficient to provide a universal income guarantee if the desire is to encourage productivity / contribution / inclusion by those who have a disability. Australian governments have recognised this in relation to 'blind pensioners' (Jordan 1984, Kewley 1973) but continue to subject others who have severe disabilities to stigmatised, selective, targeted, categorical payments. Robert Goodin (1992 pp.196-197) points out that attempting to determine work capacity by measuring levels of impairment and the adoption of any other unit of payment than the individual creates target inefficiencies because such tests of eligibility are 'surrogate measures' - they do not test the things they purport to measure directly.

The predominant payments made to unemployed people: job search, new start, and common youth allowance are, like the bulk of income support payments in Australia, categorical, means tested and targeted benefits. They currently have associated obligations attached to them compelling unemployed people to participate in training, volunteer effort, work for the dole or any other program that Centrelink or the recently Christianised and privatised job search agencies dictate. The Reference Group on Welfare Reform (2000) has foreshadowed extending such compulsion to lone parents (whose youngest child is over 13 years) and to some disability support pensioners.

The Reference Group on Welfare Reform (2000) has proposed the current categorical payment system be replaced with one 'working age' payment system (for those who now receive benefits and pensions) which would discriminate between applicants in terms of 'special needs', family composition, participation requirements and other income. I have criticised this proposal elsewhere for its individualising entitlements, its complexity and its failure to incorporate all citizens (Tomlinson 2000).

A return to the poor laws

There have been extreme right wing ideologues (Sullivan 2000, Murray [Charles] 1984, Mead 1986, 1997) who have stoked the fires of 'dependency' rhetoric and thus encouraged the general direction of Australian Government's income support policy. As well, the existing system of income support in Australia has not been without its left critics for failing to efficiently deliver sufficient benefits to those in the most financial need (Tulloch 1979, Watts [Rob] 1995 [a], 1999, Perry 1995, VCOSS & Good Shepherd 1995, Baldwin 1995, Stilwell 1999, 2000, Tomlinson 1989, forthcoming). The categorical / selective approach has drawn criticism here and overseas (Stretton 1996, Gorz 1995, 1999, Rankin1997, 1998, Ritchie 1997, Bradford 1997, McDonald 1995, Standing 1999, Lerner, Clark & Needham 1999, Murray [Michael] 1997, Boston, Danziel, & St. John 1998, Goodin 1988, 1992, Goodin & Le Grand 1987, Goodin, Headey, Muffels & Driven 1999, Page & Silburn 1998 Van Parijs 1992 [a], 2000, BIEN web site, NZUBI web site). Despite this there continues to be supporters of the current categorical system in Australia (Whiteford 1998). Pixley (1993) and Cass (1986,1988) ardently promoted the active society approach, at least during the period when Labor was in power.

Governments in Australia, New Zealand, Canada Britain and the United States consistently suggest they are providing social security in an efficient and accountable manner. They are certainly capable of determining the cost of delivering specific categorical benefits to those recipients who are paid. They can and do calculate how much they 'save' by cutting people off income support when they do not meet the totality of eligibility requirements for any specific benefit. This is accounting or target efficiency. They seem disinterested in how people who are refused benefits get by, or what social costs are incurred in the wake of decisions to remove income support from such citizens. Target efficiency processes give no measure of how efficient the system of social security is. Because the central issues which should be taken into account when assessing the efficiency of a social security system are not considered.

Some of the system wide efficiency measures, which would need to be taken into account if the efficiency of the system was being calculated, would be:

are any of the people excluded from the social security system poor,

how many people who have an entitlement miss out,

how satisfied are the people who are confined to low levels of income support,

does the social security system advance social justice for all permanent residents,

are the human rights of all residents protected (or even enhanced),

does the system remove all obstacles to inclusion of people with a disability,

are all genders, ages and ethnic groups treated equally or equitably,

is there equitable treatment provided to city and country people, and

does the system of income support provide sufficient security to recipients so as to allow them to contribute to society in ways with which they are comfortable?

The ideological underpinnings of the present Australian Government's approach have been succinctly enunciated by Howard (1999, 2000). They amount to an amalgam of individual liberal economic policy and conservative social policy. The central features of the conservative position, in the twentieth century, are:

support for traditional values, such as the family,

the importance of work ,

sexual restraint

,

the sanctity of private property, and

the belief in the inherent imperfection of human beings.

From the liberal position the Howard Government takes the importance of the individual which it overlays on its general conservative social orientation. Hugh Stretton (1996) and others (Goodin 1988 p. 7, Tomlinson forthcoming) see in the imposition of individualised obligation and eligibility determinations a return to the charity system of the poor laws so aptly described by Polanyi (1945)

Generalised income guarantees

In the last 12 months in Australia 200,000 recipients of income support have been breached by Centrelink (ACOSS 2000). Income insecurity is a constant preoccupation of citizens surviving on low incomes. Categorical, selective, targeted welfare payments which exist in Britain, Canada, Australia, New Zealand and the United States have not succeeded in abolishing Beveridge's five giants of 'squalor, want, ignorance, disease and idleness' (Timmins, 1995). The modern welfare state, in the countries mentioned, does not guarantee all permanent residents a secure income. Each of these countries has toyed with the idea of introducing generalised income guarantees for all permanent residents. Such partial income guarantees which have been installed have had eligibility requirements attached to them which demand either proven incapacity to labour, work willingness or some socially approved basis for not working (such as sole parenting or age). Many forms of generalised income guarantees have been suggested including: Guaranteed Minimum Income (GMI), Negative Income Tax (NIT) and Basic Income.

The major difference between a Guaranteed Minimum Income (GMI) or a Negative Income Tax (NIT) and Basic Income forms is that the first two are selective and Basic Income is universal. Proponents of NIT and GMI argue that it would cost the State less to introduce their models compared with a Basic Income. It is true that government outlays would be lower under NIT and GMI; but the actual drain on the budget bottom line of an unconditional Basic Income (because of increased tax compliance and ease of administration) might not be much greater than with other forms of income guarantees (Van Parijs 2000 pp. 8-9).

The history of Australia's flirtation with income guarantees has been described elsewhere (Tomlinson 1989, forthcoming, Tomlinson & Lincoln 1995, Watts [Rob] 1984, 1995 [a], Tulloch 1979, Kewley 1973, Henderson 1975 Vol. 1 Ch. 6 & Vol. 2 Appendix 6, Priorities Review Staff 1975). The essential advantage deriving out of a GMI or a NIT, compared with categorical income support, is that 'it provides an income floor below which no one falls without imposing a ceiling beyond which no-one rises' (Rhys-Williams 1965 p.163).

A non-conditional GMI or NIT, paid to each individual, would at least ensure that no permanent resident would be without an entitlement to a base income. This provides some limited security for those facing unemployment. But because NIT and GMI schemes are selective, unemployed people may not be able to calculate how their cash in hand income will be affected by part time or even low wage full time work. The existing categorical system of income support, because of combined income support withdrawal and income tax rates, exposes people, who exceed the income free level, to effective marginal tax rates of between 60 and 200% for each additional dollar earned. This has to be compared with a 47% income tax rate for incomes over $60,000. The fact that a Government sees such a situation as unremarkable stems from the belief that the poor need to be compelled but the rich need to be encouraged.

I do not draw attention to this inequitable treatment of income, between those reliant on the income support system and those who derive their livelihood from other sources, to support the ill-informed assertion that decent income support payments inhibit work willingness. I do this to argue that the people who are the most marginal to the productive process are unnecessarily disadvantaged by the confusing multiple withdrawal rates which occur when people are working and receiving categorical selective benefits. Though few workers regard the income advantage derived from working as the sole reason for engaging in employment, financial advantage is a factor influencing job choice. If a worker is unaware of the real financial impact of employment, or confused about the financial impact then the satisfaction derived from employment will be lessened.

The actual decision to seek or accept work will depend on many factors - of which the financial aspect is only one. When Professor Connie Benn headed the Brotherhood of St Lawrence's ARC Project in the late 1970s she instituted a GMI experiment and found that bread winners from low income families continued to work or actively seek work even when their families would have been as financially well off had they simply relied upon the GMI provided by the Brotherhood (Benn 1981, Liffman 1978).

The fear that generous categorical payments create work disincentives because the financial margin between working and living on benefits is insufficient to make people want to work derives out of the public choice perception of human behaviour. It ignores the entire sociology of work research and assumes that the poor have to be compelled if they are to be productive. Most beneficiaries have only the vaguest idea of how the tax and social security combined withdrawal rates operate. Most categorical combined tax/benefit withdrawal rates are so high that they create for many a financial disincentive to part-time work which leads in turn to governments compelling people to take part-time work on threat of loss of all benefits. This is a very inefficient way to construct social policy. With a Basic Income there is always a financial incentive to work- the withdrawal rate is the tax rate - and is, as a result, known and easily calculated.

The fact that such arguments (about lesser eligibility, the poor's fecklessness, the associated need for coercion and the importance of increasing the huge differentials in income between the owning and labouring classes) are a nonsense, does not make them any less valued by current Government ministers. John Kenneth Galbraith ridiculed such arguments by pointing out that "It always boils down to the highly improbable case that the rich are not working because they have too little income and the poor because they have too much" [cited in Boreham, Dow & Leet (1999) p.104]. Recently the newly elected New Zealand Labour / Alliance Government with the active support of the Greens has moved to slowly dismantle much of the compulsion infrastructure in their conservative predecessors income support system (TheJobs Letter 2000, p.3).

Basic Income

With a Basic Income, because it is a universal payment, people are always advantaged by any extra income obtained. The withdrawal rate is the income tax rate making the cash in hand situation easier to calculate than a combined tax and income support withdrawal rate.

The less eligibility argument, mounted by conservatives from the days of the Elizabethan poor law, suggests that unless welfare benefits are paid at a lower rate than would be obtained from paid jobs then work disincentives will occur. Such thinking continues to dominate policy debates in Australia, New Zealand, Britain, Canada and the United States. This, when coupled with the economic fundamentalist mind set (which suggests that minimum wage legislation makes it increasingly difficult for employers to afford to provide jobs for the least skilled) has two impacts; minimum wages are kept low and so subsequently are benefit levels.

Stephen Bell in the final chapter of The Unemployment Crisis in Australia suggest that:

In effect, those at the lower end are being asked to fund jobs growth through wage reductions with rising inequality as a key outcome. The implication is that societies confronted by the new economy, if they wish to retain some semblance of civility, must now confront distributional issues head on (Bell 2000 p.253)".

He subsequently suggests "The problem with guaranteed minimum income schemes is that they perpetuate the post war residual welfarist model of income maintenance and run a strong risk of creating a dependent and marginalised subgroup of 'recipients' vulnerable to the politics of downward envy (p.268)". He cites only Pixley (1993) and Latham 1998 p. 203) in support of this assertion. Latham's analysis in relation to universal income guarantees and dependency is refuted by many including Watts (1999, Tomlinson & Bleasdale 1999/2000). Pixley (1993) is has also drawn similar severe criticism (Watts 1995[a], [b], 1994, Tomlinson (1995) To the extent that a GMI or a NIT is selective; it means that payments go only to the poor rather than to all citizens. There are traces of welfare thinking and the potential for some envy embedded in both GMI and NIT, but if that was a major concern both 'difficulties' can be abolished by choosing a universal Basic Income, paid to each individual, as the form of income guarantee. Bell (2000) does not even consider the possibility of a Basic Income.

Van Parijs (1992[b] p.229) claims that because a Basic Income is paid, irrespective of all other sources of income, it can be used by those who desire work as a wage subsidy; yet, because it provides sufficient income on which to live, it does not compel any potential worker to work under conditions which that worker finds unacceptable. He concludes that "Whereas a rising means-tested benefit makes it increasingly difficult for unskilled people to find a job, a rising basic income makes it increasingly feasible (Van Parijs 1992[b] p.229)".

With the qualification that there may be some jobs offered in any country which are so unsafe and poorly remunerated that no one in their right mind would take them- forcing people to take such jobs by threatening the removal of benefits is unconscionable. If the intention of those who promote categorical benefits which demand work readiness is to force workers to take all available jobs then this aim might more efficiently be achieved through a Basic Income than by the enforcement of less eligibility. The inordinate invasion of privacy in the lives of applicants for unemployment benefits, the imposition of 'mutual obligation' and other stigmatising practices all have to be paid for by governments out of permanent residents' taxes. If the aim is to ensure that all job vacancies are filled, the provision of an unconditional Basic Income has the capacity to do that without compulsion. This would be both just and efficient.

A Basic Income, because it provides a known financial advantage for every extra dollar earned, abolishes both poverty traps and work disincentives (Lerner, Clark & Needham 1999 pp. 20-21). Gorz (1999 p.85) claims "The universal, unconditional grant of a basic income is, therefore...the best instrument for redistributing both paid work and unpaid activities as widely as possible [italics in original]."

It seems an absurd proposition that economic fundamentalists and the current conservative Coalition Government claim the mode of production has to deregulated for the sake of 'efficiency' but that the system of welfare redistribution should be increasingly regulated. The existing targeted categorical income support system will, if the Howard Government remains in office, move to individual benefits determination. The Minister in charge of income support is on record as saying "Simply providing payments to everyone who fits into a particular category fails to recognise the different capacities and potential people have to contribute to their own future (Newman 1999 p. 9)." This is the height of inefficient supply of benefits.

Conclusion

In juxtaposition, there are efficiency arguments which can and should be mounted in support of an unconditional Basic Income.

A Basic Income requires the least interference in the lives of citizens.

It supplies all permanent residents with equal assistance.

It is the most inclusive form of income support payment and the most secure, thus enhancing citizenship.

It provides sufficient income to allow the possibility that people will explore their creative capacity.

It removes many of the obstacles to a reinvigoration of the industrial, technical and computing infrastructure.

It allows the State a fuller understanding of the impact of its other social wage policies.

However, a Basic Income is just that - an unconditional universal income guarantee. It delivers an income floor without interfering with productivity. Its withdrawal rate on earned income is easily understandable as compared with the combined income tax and benefit withdrawal rate of selective systems such as GMI or NIT. It is a vast improvement on categorical selective social services. It is an advance on all social insurance and private provision schemes which invariably result in the 'individualisation of risk' (Lerner, Clark & Needham 1999 p. 11) and as a result create a 'do it yourself welfare state' (Klein & Millar cited in Page 1998 p.307).

Epilogue

From 1918 until 1922 Dennis Milner, Mabel Milner & Bernard Pickard campaigned for the introduction of a Basic Income (Van Trier 1995 Part 1). Eighty years ago Dennis Milner was the first British person to articulate a fully elaborated (book length) Basic Income proposal. He wanted to ensure the inadequacies of the British Poor Law system were overcome, to enhance national productivity, and to provide a more equitable base from which workers might negotiate wages (Van Trier 1995 Part 1). Whilst writing this paper I read Walter Van Trier's thesis which deals with the Milner's and Pickard's struggle to introduce a Basic Income. Many of the issues dealt with in the present paper are synonymous with those which preoccupied the Milners and Pickard. Milner did not see the introduction of a Basic Income as the be all and end all just one step on the way to a better life for all citizens. Hopefully it will not be long before we as a nation take this first step.